The value of government fleet tyre supply

In the past government-backed public sector contracts were seen as the safest business commitments around. With the economic environment being what it is, it is easy to see the attraction of securing business that you know will be paid for. However, with the finances of various European governments looking less stable than they have been for a long time, and with ministries such as the Department for Transport suffering from poor handling of rail bids such as the West Coast franchise, these types of contracts may not be the stereotypical cash cows they were once depicted as. And when you add in the fact that government contracts now have to manage the added administrative burden of labelling (which is effective from 1 November 2012), they certainly aren’t a walk in the park.

In the months running up to our annual fleet feature two of the industry’s biggest tyre suppliers (Michelin, through ATS Euromaster, and Goodyear Dunlop) announced their attainment of RM955 government fleet approval. With this in mind Tyres & Accessories used the opportunity to take a closer look at the details of the news itself and particularly what deals like this mean in business terms. First a look at the details of the two deals:

ATS Euromaster gains government supplier status

At the beginning of September ATS Euromaster announced that it will supply a full range of car, van, 4×4, truck and agricultural tyres to every public sector organisation across the UK for the next four years. According to the leading retailer, this includes products from premium to budget fitments and follows the completion of a comprehensive tender process. The multi-brand supply deal will include the nation’s fire engines, ambulances, prison vehicles and local authorities. To enable this, ATS-E was awarded supplier status to public sector organisations across the UK on the Government Procurement Service framework agreement RM955. The framework has a number of suppliers in each lot, meaning public sector organisations will be able to choose from approved suppliers for their tyre requirements. This being the case, there is still an element of competition left open to the successful bidders, something that is unlikely to be lost on any of the RM955-approved companies.

“We believe that ATS Euromaster offers the taxpayer the best value for money in tyre supply to keep crucial public sector vehicles on the move,” said Peter Fairlie, Group sales director at ATS Euromaster. “In an era of austerity we’re particularly proud to have been appointed to this framework agreement.”

Prior to this new framework agreement, ATS Euromaster was a nominated service partner on the original pan-government tyre sourcing initiative which was first established by the NHS Purchasing and Supply Agency (NHS PASA) and later led by the Office of Government Commerce (OGC). This was set up in 2007 and was available to all public sector organisations across the UK.

Goodyear Dunlop wins four RM955 lots

A week or so before the ATS-E announcement, Goodyear Dunlop released details of how it won four new lots in the Government Procurement Service RM955 supply and fit of tyres framework agreement. The first of these lots is for the sole supply and fitment of Goodyear and Dunlop tyres to UK Police Forces, while the others deal with wider public sector interests. The contracts will cover cars, trucks and motorcycles.

As part of the deal, the Police Forces and wider public sector will receive 4Fleet support, incorporating Key Performance Indicator reporting, transparent costs, tyre policy development, a dedicated account manager and a national service network.

Commenting on the deal Kerry Watts, Goodyear Dunlop’s consumer fleet manager, said: “This is a fantastic win for us, which includes fitment of our award winning winter and RunOnFlat products. Our original equipment partnerships with manufacturers which the Police Fleets work alongside, ensures that our products have been developed for the ultimate performance and safety in high pressure situations. This has been supported by our ability, through 4Fleet, to offer a level of continued service and response.”

Police tyre sales could be worth £8 million  a year alone

Ask the question “what are government contracts worth?” and you may as well ask “how long is a piece of string?” With 7.5 million fleet vehicles on Britain’s roads in total and with a significant number of these linked to government services such as fire engines, police cars, ambulances, prison vehicles and local authority transport, the details are all-important. And what’s more, with the news being as recent as it is, getting up to date information is nigh on impossible. However what we can do is look at the details relating to particular parts of this picture – such as the Police tyre spends in specific regions – and use these details to get an impression of this.

Table 1

Norfolk Police tyre spend 2008 – 2010

Financial Year      Cost

2008/2009            £128,701

2009/2010            £161,927

2010/2011            £128,662

Source: Tyres & Accessories research, Freedom of Information requests

For example Norfolk Police spends between £128,000 and £162,000 on tyres for police cars and vans each year. What the data shows is that far from falling away during the recessions in 2009/2010 tyre spend actually went up by around a quarter, before falling back down to 2008/2009 levels in 2010/2011. By comparison neighbouring police fleets in landlocked Cambridgeshire and Essex spent £87,435 and £235,069 on tyre respectively in 2010/2011. Averaged out this gives a mean spend of just over £150,000 last year.

When you multiply this by the 53 police forces in the UK this means that the police force alone is likely to spend some upwards of £8 million a year on tyres, even when you take into account the fact that some forces (like the British Transport Police) are unlikely to spend as much as others (such as Birmingham or Greater Manchester Police). Add in the many other government services requiring tyres for applications such as fire engines (which require greater numbers of more expensive tyres) ambulances, prison vehicles and local authority transport and it clear that fitting and supply tyres for government contracts is big business.

Table 2

RM955 Suppliers Awarded

Source: Cabinet Office

According to the Government Procurement Service document released by the cabinet office on the subject of RM955, in addition to ATS-E and Goodyear Dunlop, Kwik-Fit, Michelin and National have all qualified for various lots. This means obviously means that each business will be seeking to capitalise on this opportunity, but also – due to the lot system – that Michelin appears to get two bites of the cherry via Michelin directly and ATS Euromaster. Furthermore, Goodyear Dunlop is unanswered in term of police contracts according to the document. As a result, wherever the police source their tyres from they will have to have a Goodyear Dunlop group brand on the sidewall (see table 2 for more details).